Payday Lenders

Payday Lenders: Background

Payday lenders are financial firms offering small, short-term loans designed to be paid back when the borrower next receives a paycheck. Such loans carry interest rates that seem small but are extremely high when calculated over the course of a year. Payday loan firms argue that they provide necessary credit to consumers who might otherwise not be able to get loans, but critics allege that the loans place many borrowers in a cycle of high-interest debt.

Political contributions from the PACs of payday lending firms and their employees hovered in the tens of thousands per election cycle for most of the 1990s, until a surge in individual contributions in the 2000 race pushed donations to over a quarter million dollars. Contributions cracked $1 million for the first time in 2004, and hit an all-time high of $1.93 million during the 2010 races.

Spending by industry PACs has dramatically increased since the 2006 elections, with a nearly $450,000 jump from 2006-2008 and over $1 million given in 2010. 2012 contributions by PACs are on pace to break industry records, with over $800,000 given before the end of primary season.

The party split of lenders' contributions has fluctuated considerably over the past decade. Republicans held the advantage in contributions from the payday lending industry from 1996 until 2006, then industry giving swung heavily Democratic during the 2008 and 2010 cycles.

Currently, the biggest contributor in the industry is Cash America International--a pawn company and short-term lender which has more than doubled its PAC spending since the 2008 elections. In 2012, the firm's PAC has maxed out donations to several lawmakers and candidates, including Sen. Pete Sessions (R-TX), Rep. Jesse Jackson, Jr. (D-IL), and Republican senatorial challenger Josh Mandel (OH). CAI has also lobbied on such bills as the Payday Loan Reform Act and Federal Financial Services and Credit Companies Charter Act, spending approximately $1 million in both 2010 and 2011.

Another active donor in the industry is Advance America Cash Advance Centers, which has contributed over $180,000 split between individual and PAC donations during the 2010 cycle. The company has favored Republicans by a ratio of over 2:1.

Payday lenders have a multi-million dollar lobbying presence on Capitol Hill, due in large part to the efforts of the trade group, the Community Financial Services Association. The group spent nearly $2.3 million on lobbying efforts in 2011, and is on pace to match that figure in 2012. Much of the group's lobbying has been centered on the Dodd-Frank financial reform bill, which established the Consumer Financial Protection Bureau and gave it the authority to scrutinize the policies of short-term lenders.

The trade group also lobbied on the proposed Responsible Consumer Financial Protection Regulation Act, which would have made the CFPB dependent on congressional appropriations for its funding rather than independently drawing money from the Federal Reserve system.

Lobbying by the payday lending industry as a whole has increased by over 19 times since 1998, from $230,000 to nearly $4.5 million in 2011. The trend included a $2.5 million dollar jump from 2008-2009, which more than doubled the industry's lobbying expenditures.

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